Tsipras’s Debt Plan Sends Athens Stock Market Sliding

ATHENS — Investors made clear on Wednesday the depth of their concerns about Greece’s new leftist-led government, driving up its borrowing costs, pushing down stock prices and highlighting the risks in the country’s banking system.

Despite some soothing words from Prime Minister Alexis Tsipras, who at the first meeting of his new cabinet said Greece would not seek a “catastrophic solution” in its debt negotiations with the European Union and its other creditors, financial markets seemed increasingly rattled by his government’s pledges to reject the austerity policies imposed on the country over the last five years.

Later, the new finance minister, Yanis Varoufakis, appeared to harden the tone, saying that Greece’s bailout deals were “a toxic mistake” and that the new government was determined to change the logic of how the crisis had been tackled. Mr. Varoufakis said the new government would seek what he called a Pan-European New Deal, which would be a bridge between previous agreements and a new arrangement with creditors. He did not elaborate, though, on what such a plan would look like.

The White House confirmed that Mr. Tsipras spoke by telephone on Wednesday with President Obama, who has generally been critical of Europe's austerity approach and supportive of more growth-oriented policies. But Mr. Obama has also recognized the need for structural reforms to accompany growth policies.

The White House would describe the telephone conversation only in general terms. But a spokesman made clear that Mr. Obama favored a balanced strategy.

“The United States looks forward to working closely with the new Greek government to build on recent structural reforms, which lay the groundwork for economic recovery,” Mark Stroh, a White House spokesman, said in a written statement. “We will also continue to discuss ways to boost demand and job creation with our European partners to help foster an environment that supports reforms in Greece and elsewhere in Europe.”

While many Greeks were hopeful that Mr. Tsipras would follow through with even a fraction of his populist promises, investors were rattled. The Athens Stock Exchange, where billions of euros in value were wiped out during Greece’s election campaign, fell 9.2 percent on Wednesday after slumping around 11 percent on Tuesday. Shares in banks in Greece plummeted nearly 27 percent on Wednesday.

The yield on Greek 10-year government bonds spiked on Wednesday to about 10.1 percent, up from 9.25 percent when the day began, on investor unease over a possible debt restructuring. The yields were at 8.4 percent before the election and below 6 percent for most of the summer, as the Greek economy appeared poised to grow again under the prime minister at the time, Antonis Samaras.

If bond yields, indicative of the new government’s borrowing costs, remained at such elevated levels, that would make it even harder to stimulate the economy and manage the country’s debt.

European Union officials also outlined a tough-sounding position on Wednesday before what would no doubt be long negotiations over the terms of Greece’s bailout and an effort by the new government to reduce the country’s mountain of debt.

Since 2010, the so-called troika of lenders — the European Central Bank, the European Commission and the International Monetary Fund — has extended Greece two bailouts worth €240 billion, or about $270 billion.

A vice president of the European Commission, Jyrki Katainen, said on Wednesday that Brussels was eager to start talks with Greece. But noting that he saw no majority in favor of writing off any Greek debt, he added: “We expect them to fulfill everything that they have promised to fulfill.”

He emphasized that Brussels could not simply look at the popular anti-austerity excitement surrounding the Greek elections, but that he had to take into account the wishes of people in other countries, including Finns and Germans who were not inclined to give Greece a penny more. “We don’t change our policy according to elections,” he said.

Mr. Katainen’s remarks suggested Brussels’s opening bargaining position, and they did not necessarily mean that European officials would not offer concessions. But they put the heat on Athens, especially since there is not much time to reach a deal: Greece’s current European bailout, already extended, ends in late February unless there is another extension.

“We need to start working together very soon because the commitments have not changed and time is running out,” Mr. Katainen told reporters.

Asked whether Greece would be able to persuade creditors to write off some of its debt, Mr. Katainen said he thought that this was a nonstarter, at least in the Eurogroup, a grouping of finance ministers from the 19 countries, including Greece, that use the euro.

“It would be difficult to see that there would be a majority in the Eurogroup supporting a haircut in Greek debt,” said Mr. Katainen, a former prime minister of Finland, which has strongly supported Germany in demanding that Athens pay its bills.

In the cabinet meeting on Wednesday, Mr. Tsipras set out his government’s top priorities in order: tackling what he called the country’s humanitarian crisis, stimulating the economy so it could start growing sustainably, entering into a new negotiation with creditors aimed at finding a “mutually beneficial solution to the debt,” creating a “fairer” tax system, and confronting vested interests and corruption “that no one has had the guts to go against.”

He also vowed to end what he called a regime of cronyism, in which past governments would “negotiate with the rich, but not to the benefit of the poor.”

Mr. Tsipras and Mr. Varoufakis plan to meet with Jeroen Dijsselbloem, president of the Eurogroup of European Union finance ministers, in Athens on Friday. This week, Mr. Dijsselbloem warned that there was “very little support for a write-off” of Greece’s debts. Martin Schulz, the president of the European Parliament, is also scheduled to visit Mr. Tsipras this week in Athens.

The market gyrations, driven by investors’ bailing out of Greek assets, reflect fears over the coming showdown over Europe’s austerity ideology. If Greece exited the eurozone and reintroduced the drachma currency — something Mr. Tsipras says he has no intention of bringing about — many of the Greek investments held by foreigners would plunge in value when the new currency was introduced at a sharp discount to the euro.

Also, by rocking the boat, the new government has turned an uncomfortable spotlight on the Greek financial sector’s dependence on the European Central Bank for exceptional funding support. Just two weeks ago, the Greek authorities asked the central bank for emergency liquidity assistance as a precaution for Greece’s four main lenders, after Eurobank and Alpha Bank, the country’s third- and fourth-largest banks, requested access to the emergency liquidity line amid reports of an estimated €3 billion of capital flight in the previous two months.

Speculation is rife that capital flight has increased significantly since then. Greek officials said they did not immediately have new figures, and declined to comment on whether those emergency funds had been tapped.

William Lelieveldt, a central bank spokesman, said only that “we don’t provide real-time information on which kind of liquidity is requested or drawn.”

Still, the sell-off, while drastic, was not far out of line with the kind of volatility that has characterized the Athens financial markets since the onset of the country’s crisis in 2010. Indeed, investors now tend to treat Greece more like a developing country than a member of the developed world. That volatility could die down as quickly as it arose should a suitable solution be found.

The most likely outcome, according to Holger Schmieding, chief economist at Berenberg Bank in London, is that “facing reality, Prime Minister Tsipras will eventually get real.”

“A patient Europe will offer face-saving compromises,” he said.

Still, Mr. Schmieding said in a research note, that in the meantime there could “be a rough ride for Greece.” And he warned that the odds of an “accidental” Greek exit from the eurozone, at 35 percent, were not insignificant.

Adding to the uncertainty was a report that Mr. Tsipras had basically frozen Greece’s privatization program, which had been a central demand of creditors in approving the country’s international bailouts. The troika had expected Greece to raise tens of billions of euros to pay its debts by privatizing state assets.

But the country’s new energy minister, Panagiotis Lafazanis, told Greek television that the government was immediately halting plans to privatize a public power company. It was also delaying the sale of a portion of Piraeus Port, one of the most strategically placed in the Mediterranean, to the Chinese state-owned company Cosco, which already owns half of Piraeus and had recently signed an agreement to start expanding cargo capacity on the other half of the port.

Mr. Tsipras said he was well aware of the high expectations for him in Greece, and the heavy responsibility his government shouldered. He suggested that the rousing messages of support he had received from leaders in numerous countries, from Russia to France to Spain, signaled that compromise was possible.

“The country is lifting up its head, assuming global significance, attracting international interest,” he added. “Greece is regaining its self-confidence and building alliances that will allow it to set its own agenda at the European table.”

“We have no time to delay,” he added. “There is no room for mistakes.”

Correction:

Because of an editing error, an earlier version of this article misstated the day the interest rate on Greek 10-year government bonds increased nearly 1 percent. It was Wednesday, not Thursday.

Andrew Higgins contributed reporting from Brussels, David Jolly from Paris, and Niki Kitsantonis from Athens.

A version of this article appears in print on , on Page B3 of the New York edition with the headline: Markets in Greece Are Rattled by Debt Plan Offered by Prime Minister. Order Reprints | Today’s Paper | Subscribe